Interest Rate
Direct definition
The percentage a lender charges to borrow money, quoted on an annual basis.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
The interest rate — also called the note rate — determines the interest component of your monthly payment. APR is broader because it includes certain fees.
Why it matters
Rate directly drives your monthly payment and total interest over the loan.
Where you may see it
- Loan Estimate
- Closing Disclosure
- Mortgage note
A real-world example
Dropping from 7.0% to 6.5% on a $400,000 30-year loan saves about $130/month.
Educational and illustrative only
A common misunderstanding
The interest rate is not the same as the APR — the rate applies only to the loan balance, while APR reflects certain added costs.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026